RBI issues draft guidelines for Cross Border Mergers & Acquisitions

The Reserve Bank of India (RBI) on 26 April 2017 issued draft guidelines on cross border merger transactions in accordance with the rules notified by Union Ministry of Corporate Affairs through Companies (Compromises, Arrangements and Amalgamation) Amendment Rules, 2017.

RBI proposed these Regulations under the Foreign Exchange Management Act, 1999 (FEMA).

Highlights of the draft guidelines for Mergers & Acquisition
• The draft regulations will be known as 'Foreign Exchange Management (Cross Border Merger) Regulations'.
• These guidelines are aimed at addressing the issues that may arise when an Indian company and a foreign company enter into scheme of merger, demerger, amalgamation, or rearrangement.
• These Regulations stipulate conditions that should be adhered to by the companies involved in the Scheme.
• The regulation makes reporting of any cross-border activity mandatory within 180 days from the date of sanction.

Background
Section 234 of the Companies Act, 2013 provides for mergers and amalgamations between Indian companies and foreign companies.

Accordingly, the Union Ministry of Corporate Affairs on 13 April 2017 issued Companies (Compromises, Arrangements and Amalgamation) Amendment Rules, 2017 to operationalise this section of the act.